Our study of the corporate loan pricing policies of U.S. banks over the past two decades shows that loan spreads for riskier firms become relatively lower during periods of monetary policy easing compared to tightening. This effect is driven by banks with greater risk appetite, measured from individual banks’ answers to the Senior Loan Officers Opinion Survey. Our results hold with different fixed effects that account for time-varying observed and unobserved heterogeneity of credit demand and bank lending conditions that are not directly related to monetary policy. Together with our survey-based measure of bank risk appetite, we provide compelling evidence of the presence of a bank risk-taking channel of monetary policy in the U.S.

In this article, we show that when banks increase their use of wholesale funding they shorten the maturity of loans to corporations. This effect appears to be linked to banks’ exposure to rollover risk resulting from their increasing use of short-term uninsured funding. Banks that use more wholesale funding shorten both the maturity of newly issued loans and the maturity of their loan portfolios. These results are not present among banks that rely predominantly on insured deposits. The link between wholesale funding and loan maturity is robust, and holds when we include firm-year fixed effects, suggesting that the decline in loan maturity is bank driven. In line with this premise, we find that the slope of the loan yield curve becomes steeper for banks that use more wholesale funding and that borrowers turn to the bond market to raise funding with longer maturity in response to banks’ loan maturity shortening.